If you’ve been following our newsletters, you know July was our “Nerd Wallet” month! Given my tenure as Dash Capital’s “Chief Coupon Officer” and “Credit Card Guru”, I figured it would be prudent to share some of my insight on one of personal finance’s hottest topics –– credit cards.
Credit cards, credit cards, credit cards. Where do I start.
First, the obvious. The con of “I’ll just pay that off later” aka using a credit card to pay for something that you don’t have in the bank is a bad idea 99% of the time. On the other, not so scary hand, the pros of credit cards can open the doors to some amazing experiences. Many of which our newsletters, monthly reports and podcasts have and will continue to cover.
I’d like to share that I’ve learned my lessons the hard way and I started out very similarly to the average American. I graduated from a local private college (RIT) with $90k+ of student loans, $10K in credit card debt, a missed small business opportunity and a little sports car that I couldn’t afford. Sounds like fun! Well…it wasn’t! I was so stressed that’s why I probably majored in finance! Plus, I loved helping people which led me into personal financial planning and wealth management. The determination in helping people ended up rewarding me with an amazing life, loving wife, beautiful daughter, amazing clients, successful business, and a team of advisors with the same mindsets that get me excited to come into work each day.
When I was a young lad – my parents were always smart with their monies. They didn’t make a ton but didn’t spend frivolously and always saved for our family to go on at least one big annual vacation that we were always extremely grateful for. They kept good credit, paid their bills on-time and forced us to work for our own money. Over the last two decades these annual vacations became bigger and bigger and I knew my parents were not significantly increasing their income. Welcome to the credit card game: the right way!
Through her smart money management skills, knowledge from others, countless hours reading and systems on systems, my mother figured out how to maximize travel rewards through the credit card system. She then passed these lessons on to her family and friends. To this day I still reach out to her with questions on the topic!
These concepts may seem easy, but implementation is the tough part. At minimum you must be willing to diligently track monthly. I use spreadsheets and online tools to help me track but if you let this get out of hand I promise you the stress, money and mismanagement is not worth it.
On that note, drumroll please…. let’s talk about how my wife and I went on our honeymoon to Thailand for FREE.
My wife and I made the decision to have a destination wedding in the Riviera Maya, Mexico. One of the best experiences of our lives, but also one of the bigger expenditures of our lives. Luckily, being a financial advisor and excel weirdo, I still have the spreadsheets of costs and credit cards to look back on. We agreed before the wedding that we always wanted to go to Thailand for our honeymoon. It was a dream for us to see the limestone cliff beaches, embrace the Buddhist culture, eat amazing spicy food, ride a scooter throughout the country, hang with monkeys and elephants in the sanctuary and so much more (#maxyourdash). Our minds were set, that’s what we were going to do…with very little money!
**I will preface this by saying offers and rules have changed over the years so this is NOT financial advice but simply a story with fictitious numbers for educational purposes**
For simplicity’s sake, I’m going to use round #’s! We saved $20,000 for the wedding. If you’re fortunate enough, you’ll get some of that back from guests or help from parents/relatives. The wedding was one of those one-in-a-lifetime instances that you will have to come up with a chunk of change and luckily for us the resort accepted credit cards for this type of payment. We asked ahead of time, and they said you can use as many cards as you want to get to the $20k. Because there was money to pay off the credit cards as soon as the bill arrived, we didn’t think twice about the interest rate associated with these credit cards to pay them off. Most, if not all, of the good travel reward cards come with annual fees and high interest rates. HOWEVER, if you use them appropriately the interest doesn’t matter, and the fee should pay for itself. I recommend to many folks that have a one-time large expense (wedding, home improvement, etc) to see if they can leverage credit cards to help with some of their travel goals. Also, we had no major purchases forecasted in the short-term where a change in credit stature would impact us. Plus, it was my wife and I working together (with each other’s credit) to make this happen. We essentially were able to get 6-7 credit cards to pay for almost three weeks of airfare, transfers, and hotels – leaving us responsible for just the food and drink! And in Thailand you have to try really hard to spend more than $50 a day on food and drink (assuming you’re embracing and not trying to be fancy).
Step 1: Saved $20k for the wedding
Step 2: Asked if the resort accepted credit cards
Step 3: Forecasted out any major purchases in the short-term which would involve credit usage
Step 4: Spent the $20k between 6-7 credit cards (researched cards and intro offers/perks)
Step 5: Paid of the 6-7 credit cards with the original $20k saved
Step 6: Paid for 3 weeks’ worth of airfare, transfers, and hotels with the points and rewards
Since the rewards are different now than in 2017, I’ll share a very overly simplified example of what I would do today. Just know, we would likely think more about where we want to stay and match the hotels in the area with the cards. Additionally, we would match the perks we like with what airlines we would fly with the best routes and prices because of the 23–36-hour one way flight. Nonetheless, you’ll get the gist.
Summary: you’ll spend $380 in annual fees for the $20,000 spent on 6 cards (3 each person) in 3 months. You’ll pay no interest because you paid off in full. For a value of $5,987.50 or MORE!
Please note this was written in July 2021. We never add each other as an authorized user, as it’ll make that person ineligible for the offer. So much has likely changed in just a few days; offers, fees and rules.
In closing, this type of strategy should only be used if you’re diligent with your budgeting and are confident in your spending habits. As always, a complete review of your financial situation should be made before making any decisions. And that’s it! Now you’re well on your way to becoming a “Chief Coupon Officer”!